Ryerson says: "Money is hard to come by, so when one has money one should make sure that, above all, one doesn't lose it. One hears a lot of success stories about people making a lot of money by investing, but of course you don't hear about the people who lose money investing. As risky as it is, based on so many unknown factors, investing your money really is like gambling. The only prudent plan is to keep money in a savings account where it can earn a predictable amount of interest. One can't lose money that way, at least, so with money in a savings account one can always count on it being there for future needs." Groh responds by saying: "Investing is inherently risky, but the risk need not be insurmountable. It is true that the more potential there is for a higher return, the higher the chance is also for more money to be lost. But there are more and less risky ways to invest, and even the less risky investments can give a significantly higher return than a simple savings account. When one diversifies one's stock holdings, one increases the chances of getting a good return among one's holdings, and decreases the damage from a loss in value. Also, even if stocks lose value temporarily, the value of stocks overall has always gone up over long periods of time. So a savings account, while it may seem prudent and safe, is probably not the best way to ensure that money is being saved in the most optimal way possible."
Which of the following assumptions does Groh make?
A) Inflation can outpace any interest rate.
B) Given enough time, any stock will eventually go up in value.
C) The riskier the investment, the more value it will have over a long period of time.
D) The more stocks you invest in, the higher their value will be.
E) The stock market overall will experience net growth over time.
Correct Answer:
Verified
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